ORIE 3150 Homework _1 Answers Fall 2010

ORIE 3150 Homework _1 Answers Fall 2010 - ORIE 3150...

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ORIE 3150 Homework #1 Answers
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P1-5B (a) 1. The $3,000 of revenue that the company earned in 2009 should not be included in the 2010 revenues. Instead, the $3,000 should be added to the beginning balance of retained earnings to correct for the omission in 2009. 2. Since the corporation did not incur or pay the $12,000 of rent expense, it should not be included in the income statement. Including the $12,000 as an expense misstates the corporation’s net income and presents misleading results. 3. Including the $2,000 as vacation expense misstates the corporation’s net income.
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(b) HOUSTON CORPORATION Income Statement For the Year Ended December 31, 2010 Revenue ($50,000 – $3,000)* ...................................................... $47,000 Expenses Insurance expense .............................................................. 7,000 Net income ................................................................................... $40,000 *Glenda incorrectly included revenue of $3,000 in 2010. This revenue should have been reported in 2009.
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8. The Revco Corporation had the following assets and liabilities on the dates indicated. The corporation’s fiscal year ends on December 31 each year.
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